ACCC wants to curb digital platform power – but enforcement is tricky
The recent ACCC report acknowledges Google and Facebook each possess substantial power in Australia. But what next? Katharine Kemp explores the findings in this crossposting from The Conversation.
We need new laws to monitor and curb the power wielded by Google, Facebook and other powerful digital platforms, according to the Australian Competition and Consumer Commission (ACCC).
The Preliminary Report on the Digital Platforms Inquiry found major changes to privacy and consumer protection laws are needed, along with alterations to merger law, and a regulator to investigate the operation of the companies’ algorithms.
Getting the enforcement right will be key to the success of these proposed changes.
Scrutinising accumulation of market power
The report says Google and Facebook each possess substantial power in markets such as online search and social media services in Australia.
It’s not against the law to possess substantial market power alone. But these companies would breach our November 2017 misuse of market power law if they engaged in any conduct with the effect, likely effect or purpose of substantially lessening competition – essentially, blocking rivalry in a market.
Moving forwards, the ACCC has indicated it will scrutinise the accumulation of market power by these platforms more proactively. Noting that “strategic acquisitions by both Google and Facebook have contributed to the market power they currently hold”, the ACCC says it intends to ask large digital platforms to provide advance notice of any planned acquisitions.
While such pre-notification of certain mergers is required in jurisdictions such as the US, it is not currently a requirement in other sectors under the Australian law.
At the moment the ACCC is just asking the platforms to do this voluntarily – but has indicated it may seek to make this a formal requirement if the platforms don’t cooperate with the request. It’s not currently clear how this would be enforced.
The ACCC has also recommended the standard for assessing mergers should be amended to expressly clarify the relevance of data acquired in the transaction as well as the removal of potential competitors.
The law doesn’t explicitly refer to potential competitors in addition to existing competitors at present, and some argue platforms are buying up nascent competitors before the competitive threat becomes apparent.
A regulator to monitor algorithms
According to the ACCC, there is a “lack of transparency” in Google’s and Facebook’s arrangements concerning online advertising and content, which are largely governed by algorithms developed and owned by the companies. These algorithms – essentially a complex set of instructions in the software – determine what ads, search results and news we see, and in what order.
The problem is nobody outside these companies knows how they work or whether they’re producing results that are fair to online advertisers, content producers and consumers.
The report recommends a regulatory authority be given power to monitor, investigate and publish reports on the operation of these algorithms, among other things, to determine whether they are producing unfair or discriminatory results. This would only apply to companies that generate more than A$100 million per annum from digital advertising in Australia.
These algorithms have come under scrutiny elsewhere. The European Commission has previously fined Google €2.42 billion for giving unfair preference to its own shopping comparison services in its search results, relative to rival comparison services, thereby contravening the EU law against abuse of dominance. This decision has been criticised though, for failing to provide Google with a clear way of complying with the law.
The important questions following the ACCC’s recommendation are:
The ACCC has not recommended the regulator have the power to make such orders. It seems the most the regulator would do is introduce some “sunshine” to the impacts of these algorithms which are currently hidden from view, and potentially refer the matter to the ACCC for investigation if this was perceived to amount to a misuse of market power.
- what will the regulator do with the results of its investigations?
- if it determines that the algorithm is producing discriminatory results, will it tell the platform what kind of results it should achieve instead, or will it require direct changes to the algorithm?
If a digital platform discriminates against competitive businesses that rely on its platform – say, app developers or comparison services – so that rivalry is stymied, this could be an important test case under our misuse of market power law. This law was amended in 2017 to address longstanding weaknesses but has not yet been tested in the courts....MUCH MORE
